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1. The Source of Economic Problems : Scarcity

  A. Meaning
 
ScarcityMean refers to a state in which the available quantity of a good is less than the desired quantity at zero price.
 
  B. How does Scarcity Arise?
  1. Our wants are unlimited.

 

 

2.
 
 
If resources are also unlimited, we are produce sufficient quantities of all goods and services to fully satisfy the wants of all people. However, in reality, resources exist in limited quantities. therefore, we can only produce a portion of the total amount of goods and services we desire.
 
  C. Free Goods and Economic Goods
 
Based on the concept of scarcity, goods can be classified into two types: free goods and economic goods
  1. Free goodsMean
 
A good is free if it exists in a quantity more than necessary to satisft all people's want.
Goods which we can obtain in any quantity without incurring any cost.
e.g. air, sunshine, water in ocean,etc.
Sunshine
Sunshine is free.
 
 
  2. Economic goodsMean
 
An economic good exists in a quantity which is not sufficient to satisfy all people's want.
To obtain an economic good ( also called scarce good ), a cost is incurred.
Electronic Lamp
Electronic lamp is not free. It is economic goods.
 
 
  D. The implications of Scarcity
  Scarcity implies :
  1. the need to economize
 
Since resources are limited, we need to economize ( i.e. to make the best use of ) them ifwe wish to maxmize our output.
 
  2. competition
 
Scarcity means some people cannot get the goods they want. This gives rise to competitionfor variousscarce goods and services.
 
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